As we look toward 2017 and a fresh year of trading, it’s prudent for all market participants to map out a game plan. Your 2017 game plan should include the types of risks you’re willing to take, as well as at least some sort of idea as to what the new year holds for equities.
To be clear, I don’t believe in being able to “forecast” an entire calendar year’s ups and downs … any stock market game plan we form at the beginning of a year must be adjustable. If push comes to shove, it should also be entirely re-writable.
In my eyes, anyone attempting to pick stocks must consider where we are in the business cycle. This past November, for instance, featured an explosive rally in stocks and other risk assets following the U.S. election, but was also combined with several economic data points showing signs of improvement again.
The surging dollar (combined with a rally in bond yields) points toward a fresh cyclical bull market, all within the context of a larger secular bull market, which we have been in since 2009.
If indeed we find ourselves in the early stages of a new cyclical bull market, then looking toward early cyclical stocks such as the technology and industrial sector, as well as any otherwise strong single stock growth stories in 2017 makes sense.